Chapter 5: Project Invoicing

CHAPTER 5: PROJECT INVOICING

Objectives
The objectives are:

• Describe invoicing project concepts.

• Set up project invoicing.
• Set up project contracts.
• Define billing requirements for transactions.
• Create, adjust, and post invoice proposals.
• Invoice on-account transactions.
• View posted invoices.
• Reverse transactions using credit notes.

Introduction
Microsoft Dynamics AX® 2012 uses two methods to invoice based on the type of
project. While time and material (T&M) projects use the invoice proposal form
to create invoices based on the transactions posted to the project, fixed-price
projects use predefined payment amounts that are based on predefined milestones
in the project.

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Concept Review
As discussed previously in the “Understanding Project Types,” chapter the
project type and project contract determines how projects are invoiced to
customers:

• Time and material project customers pay for costs and consumption
as they occur.
• Fixed-price project customers pay according to an agreed contract
price with defined installments.

Time and Material Projects

In a time and material project, transactions are invoiced to the customer at
predefined prices or cost markup. You do this using invoice proposals on the
individual projects or contract.

Although time and material projects do not always have a contract price (the
customer pays according to consumption and costs), customer advance payments
can be agreed to be offset at some time. For example, a 25 percent down payment
can be set up and then offset with the actual costs as they occur.

Fixed-Price Projects
Fixed-price project customers can pay the contract price in several installments
according to the project's contract. For example, the customer agrees to pay 25
percent of the contract value upon signing and the remaining amount in
installments according to a degree of completion.

Invoicing Setup
The billing process in Microsoft Dynamics AX Project management and
accounting module differs from the sales order billing process available in the
Accounts receivable module. This is because customer invoices are collected for
project transactions over a specified period. It allows you to create proposals that
can be revised before posting the invoice.

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The following figure shows the general invoicing flow for time and materials
projects within the Project management and accounting module.

FIGURE 5.1 TIME AND MATERIALS INVOICING FLOW

Project Contracts
The project contract contains necessary customer information for correctly
issuing invoices to a project customer. All external projects must refer to a
project contract, so this facilitates subsequent project handling.

The project contract includes information about the following:

• Invoicing currency
• Customer and address information
• Terms of payment
• Sales tax and tax information
• Fixed exchange rate agreement references

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To view the list of project contracts, open

Project management and accounting > Common > Projects > Project
contracts.

FIGURE 5.2 PROJECT CONTRACT LIST

Procedure: Create a Project Contract

To create a new project contract:

1. Open Project management and accounting > Common >

Projects > Project Contracts.
2. On the Action Pane, select the Project Contract tab. Then in the
New group, click Project Contract.
3. In the New project contract form, enter the Project contract ID.
You can enter this number manually, or the number will be
automatically generated from the number sequence if you have
selected this option in the Project management and accounting
parameters form.

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4. Enter information in the other fields in the form to set up the project
contract.
5. Click OK.

FIGURE 5.3 NEW PROJECT CONTRACT

The project contract allows a company to conduct multiple projects for the same
customer under a single set of billing terms.

You can invoice the customer for work on all projects related to the contract on a
single invoice or invoices from each individual project.

NOTE: If the customer information check box is selected on the Invoice tab in
the Project parameters form, you are prompted to specify whether you want to
transfer customer information when you create a new project and select a project
contract. If you click Yes, the program enters the customer address information
from the Address tab in the Projects form.

When you create a subproject, it automatically inherits the project type of the
parent project. If it is necessary, you can change the project type of the
subproject.

Project Contract Details

The invoicing routine uses the information from the project contract when
invoicing project transactions for a customer. These include the following:

• Project Contract ID (required)

• Name
• Sales currency (required)
• Invoice frequency (required)
• Sales tax group (optional)
• Price group (optional)

The Lock sales currency setting specifies that all transactions for projects
related to the contract are entered using the same sales currency as the project
contract.

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In addition to basic project contract settings, you can manage funding sources,
funding rules, and funding limits to project contracts. These are covered in the
Project Management and Accounting Advanced course.

Attach Projects to Project Contracts

After a project contract is defined, it can be used when you create a new external
(time and materials or fixed-price) project.

One Project contract - many projects attached. A customer may be connected

to many different projects. With one project contract, one invoice can be issued
for all or only parts of these projects.

One Project - many different project contracts attached. Alternatively, one

large project can be connected to many different customers. By creating a project
hierarchy and attaching the projects to different project contracts, you can report
on the whole project hierarchy and bill the subprojects separately.

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Lab 5.1 - Create a New Project Contract

In this lab, you will create a new project contract and contract.

Scenario

Contoso Ltd just signed a new contract (Contract ID 100232) with a customer,
Forest Wholesales (Customer ID 1101), for two projects—an installation in
Chicago that is a time and materials project and an installation in Seattle that is a
fixed-price project.

Challenge Yourself
Create a new project contract and two new projects for the existing customer.
Create a time and material project named “FWTM1” and give it a project name
of “FW Install-Chicago” and the project group of TM1. Create a fixed-price
project named “FWFP1”. Name it “FW Install-Seattle” and assign it the project
group FP1.

Need a Little Help?

Make sure that you create the project contract before you create the projects.

Step by Step

1. Open Project management and accounting > Common >

Projects > Project contracts.
2. On the Action Pane, select the Project contract tab. Then in the
New group, click Project contract.
3. Type "100232" for Project contract ID. Select Customer for
Funding type.
4. Select 1101 for Funding source.
5. Select USD for Sales currency.
6. Click OK.
7. On the Action Pane, in the Project contract tab, in the New group,
click Project.
8. Set Project type as Time and Material.
9. Type "FWTM1" as Project ID and "FW Install-Chicago" as the
Project name. Select TM1 as Project group.
10. Click OK.

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11. Click Close on the Project details form.

12. On the Action Pane, in the Project contract tab, in the New group,
click Project.
13. Select Fixed-price in the Project type field.
14. Type "FWFP1" as Project ID and "FW Install-Seattle" as the
Project name. Select FP1 as Project group.
15. Click OK.

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Billing Requirements for Transactions

For time and materials projects, project transactions must be entered into the
system before invoice proposals can be created. Entering project transactions
were reviewed previously.

The following project transaction types can be billed to a customer:

• Hours
• Expenses
• Fees
• Items

Apart from these, the following item tasks can be billed through the project
invoice:

• Item requirements
• Sales orders
• Production orders
• Purchase orders
• Vendor invoices

NOTE: A sales order attached to a project cannot be invoiced through a

customer invoice. This is to make sure all project-related expenses and items are
included on the same invoice, regardless of whether they are created as item
requirements or sales orders.

The following table shows the transaction properties that drive the invoice
proposal process for time and materials projects.

Property Description
Line To select transactions from invoicing, post the transactions
property with a line property that is chargeable.
Quantity Specify the number of units that the customer will be charged
for.
Sales Compute the total invoice amount using the transaction Sales
price price. If no sales price is specified, the invoice proposal
includes a transaction without a currency amount to invoice to
the customer.
Sales tax Make sure each transaction on the project includes a Sales tax
group and Item Sales tax group specified for sales taxes to be
included on the invoice proposal.

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Invoice Proposals
Before invoicing time and material projects, create an invoice proposal. It can be
edited before final posting.

The invoice proposal is generated based on the transactions registered on the

projects. The transaction types are as follows:

• Expense
• Employee hours
• Fee
• Items
• Offset on-account payments

Several methods can be used to create invoice proposals:

• Open Project management and accounting > Common >

Projects > All Projects. On the Action Pane, select the Manage tab.
In the Bill group, click Invoice proposals. Clicking New will create
an invoice proposal for the selected project.
• Open Project management and accounting > Common >
Projects > Project contracts. On the Action Pane, select the
Manage tab. In the Bill group, click Invoice proposals. Clicking
New will create invoice proposals for all projects attached to the
selected project contract.
• Open Project management and accounting > Common > Project
Invoices > Invoice Proposals. Clicking New will create invoice
proposals for all projects.

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• Open Project management and accounting > Periodic > Project

Invoices > Create invoice proposals. This will create invoice
proposals for all projects.

FIGURE 5.4 PROJECT INVOICE PROPOSALS

The Invoice proposals form includes proposed invoice lines on separate tabs,
according to the transaction type.

The invoice proposal can have four different invoice statuses:

• Open: When the invoice proposal is created, it is marked as open by

default.
• Cancelled: When an invoice proposal is cancelled, the status
automatically updates.
• Approved: If the invoice proposal is approved, the status changes to
Approved depending on the parameter settings.
• Invoiced: Invoices are posted to the invoice journal and available in
the Accounts receivable module for collection.

By default the system displays active invoice proposals. This includes those with
the Open and Approved status.

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Procedure: Create an Invoice Proposal

To start the invoicing procedure from a project, follow these steps:

1. Open Project management and accounting > Common > Project

Invoices > Invoice Proposals.
2. Click New, and then click Invoice proposals.

FIGURE 5.5 CREATE INVOICE PROPOSALS FORM

3. Select the type of transactions to include on the invoice under

Include transaction types on the General tab.
4. If using project sales order, determine which items to include for the
invoice proposal. This includes the following:
o The active deliver now quantity
o The entire sales order
o Items on the picking list
o Items on the packing slip

5. Enter the date range for the transactions to include in the proposal in
the From date and To date fields, and then select the Invoice date.
Unless the posting date of the invoice changes, it defaults to the
system date.
6. Use the standard Select in Microsoft Dynamics AX to modify the
query of the selection of transactions.
7. Click OK when the selection is complete to create the invoice
proposal.
8. Click the various tabs to view the transactions included in the invoice
proposal.
9. Click Totals to view a summary of the invoice.

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Edit the Invoice Proposal

Once an invoice proposal is completed it can be edited. The following changes
can be made to the proposal:

• Cancel the proposal.

• Delete a proposal line.
• Add a new proposal line.
• Edit sales price and transaction texts.

Canceling the invoice proposal only cancels the proposal lines. To access a
cancelled invoice proposal, a new invoice proposal must be created.

Open Project management and accounting > Common > Project invoices >
Invoice proposals.

FIGURE 5.6 EDITING A PROJECT INVOICE PROPOSAL

To delete one or more proposal lines, select the transaction(s) and then click
Remove from the toolbar. This does not delete the actual transaction, only the
line from the invoice proposal. Deleted lines appear as proposals the next time an
invoice proposal is run.

If new transactions are posted within the same date range as the previously
created invoice proposal, and they must be included, use Add lines. The system
finds any transactions that fall into the same selection criteria that is specified in
the original invoice proposal and adds them to the existing proposal.

Some changes that can be made to individual transactions included in an invoice

proposal. Once the changes are included, the sales price and transaction text can
be updated on each transaction.

Any adjustment to the transactions beyond changing these two fields will require
a cancel of the proposal and the use of the transaction adjustment functionality.
Alternatively, right-click the specific invoice proposal and click View Details.
Then click the Project tab. Next, on the Action Pane, in the Maintain group,
click Edit.

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Post Invoice
Once the invoice has been reviewed and edited, and the invoice proposal lines are
satisfactory, check the totals and the sales tax that apply for the invoice. Do this
by clicking the Totals button. Finally, Post the invoice.

As with standard sales order invoicing, you can specify whether a credit limit
check of the customer must be performed when you post the invoice. The overall
control of how the system warns the user if the credit limit is exceeded is set up
in the Project management and accounting parameters form under credit
rating.

In addition to the invoice proposal form, Invoice proposals can also be posted by
running the periodic job, Post invoice proposals. To find this job, open Project
management and accounting > Periodic > Project invoices > Post invoice
proposals.

FIGURE 5.7 POST INVOICE FORM

This screen will display all the invoice proposals ready for posting. Click OK to
post the invoices.

To view the invoice before posting, clear the Posting check box. Pro Forma will
be printed on the invoice to signify it is a sample invoice. To print the invoice,
select the Print invoice check box.

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Invoice Approval
Two methods control who can invoice update, post and print a project invoice to
a customer:

• The invoice approve parameter

• Standard user rights

The invoice approval parameter - To activate the invoice approval, open

Project management and accounting > Setup > Project. Then click the
Invoice tab. Select the Active check box, and select the appropriate user group. If
this is checked, Approve will be active on the Invoice proposal screen, and
proposals must be approved before they are posted.

FIGURE 5.8 PROJECT MANAGEMENT AND ACCOUNTING INVOICE

PARAMETERS

Standard user rights - Standard administrative tools can be used for restricting
user access to certain elements within the application if the approval process is
not being used. Record-level security can be used to deny the ability to post
invoice proposals.

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Lab 5.2 - Create an Invoice Proposal

In this lab, you will create an invoice proposal for a time and material project.

Scenario

Contoso Ltd needs to create an invoice for Project 10004 - Service Collinsville
Stadium for the month of May. It should be invoiced on 5/31/2008. Any Service
hours should not be included in this invoice.

Challenge Yourself!
Create and post an invoice proposal for the month of May for project 10004.

Need a Little Help?

Delete hour transactions with the category of Service from the invoice proposal
under the Hours tab.

Step by Step

1. Open Project management and accounting > Common > Project

Invoices > Invoice proposals.
2. Click New, and then click Invoice proposals.
3. Make sure all transaction types are selected for the proposal.
4. Enter “5/1/2008” and “5/31/2008” as the From and To dates,
respectively.
5. Enter “5/31/2008” as the Invoice date, and click OK.
6. Click the Hours tab, and highlight any line that has a category of
Service. Delete those lines from the proposal.
7. Click Post.
8. Click OK to post the invoice.

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On-Account Invoicing
On-account invoicing is another method of invoicing for both fixed-price and
time and material projects. It is only available for external project types, and
differs in the setup and concept for time and material projects as compared to
fixed-price projects.

The same basic procedure is used to enter on-account transactions on time and
material and fixed-price projects. However, on time and material projects include
the option to enter an offset transaction.

On-Account Invoices in Time and Material Projects

On a time and material project, only actual expenses are ordinarily billed.
However, you can create on-account invoices for prepayments or milestone
payments that can then be offset after the actual expense is incurred.

For example, a customer wants to set up a billing schedule for the duration of a
project so cash flow is consistent. However, the customer wants to see the
expenses that relate to these payments in an invoice as they occur. As such, the
customer wants a time and material project with on-account billing.

Open Project management and accounting > Common > Projects > All
projects. Select the specific project. On the Action Pane, click the Manage tab.
Then in the Bill group, click On-account transactions.

FIGURE 5.9 TIME AND MATERIAL ON-ACCOUNT FORM

When the project is completed, the final invoice displays the following:

• On-account payments
• Offsets to those payments
• Actual transactions on the project

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On-Account Invoices in Fixed-Price Projects

For fixed-price projects, on-account invoices should be used for milestone
billing. For example, a customer may want to set up scheduled payments based
on the progress of a fixed-price project. The figure below displays the on-account
invoices for this type of billing setup. The on-account amounts should be set up
line by line without offset transaction lines.

The following figure displays the basic flow in the on-account procedure.

FIGURE 5.10 ON-ACCOUNT PROCEDURE

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Procedure: Create On-Account Transactions

Follow these steps to enter on-account transactions from the project or project
contract:

1. Open Project management and accounting > Common >

Projects > All projects.
2. On the Action Pane, select the Manage tab. From the Bill group,
click On-account transactions.

FIGURE 5.11 ON-ACCOUNT TRANSACTIONS FORM

3. Enter the Project date, Description, Currency, and Amount on

each line on fixed-price projects. If the exact date to the milestone is
not known, leave the date blank. The text entered in the Description
field will be printed on the invoice.
4. Enter the on-account amounts and their offset transactions for time
and material projects. Microsoft Dynamics AX does not control
whether the total of the offset transactions corresponds to the on-
account amount. Offset transactions are entered as negative amounts
when the Offset transaction check box is checked.
5. The Currency and Tax group fields are automatically completed
according to the customer's data on the project contract. However,
these can be changed.

Procedure: Create On-Account Proposals

Follow these steps to enter on-account transactions. From the project or project
contract:

1. Open Project management and accounting > Common >

Projects > All projects.
2. Select Project.
3. On the Action Pane, select the Manage tab. From the Bill group,
click Invoice proposals.

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4. Click New, and then click On-account invoice proposals.

FIGURE 5.12 ON-ACCOUNT PROPOSAL

5. Enter the date range in the From date and To date fields and the
Invoice date, and then click OK to create the invoice proposal.
6. View the on-account lines on the On-account tab.
7. Edit and delete lines in the generated proposal.
8. Click Post to update and print the invoice after editing.

On-Account Sales Tax

Specify sales tax and an item sales tax group on the on-account transaction in the
on-account form.

The sales tax is presented as a default from the project contract attached to the
project where the on-account transactions are set up. You can override the sales
tax code if needed.

The default item sales tax for on-account is set up on the Financial tab on the
Project management and accounting parameters form. To view this form,
open Project management and accounting > Setup > Project management
and accounting parameters, and then click the Financial tab.

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Lab 5.3 - Create an On-Account Invoice

In this lab, you will create an on-account transaction and invoice it.

Scenario

Project 20002, Cheetah Concert Hall, has added some scope to the original
estimate. The customer has agreed to pay an additional $10,000 for some
additional work.

Challenge Yourself!
Create a new on-account record and invoice it. The record should be called
“Additional Work” and should be invoiced on 5/31/2008.

Need a Little Help?

In the invoice proposal process, click New.

Step by Step

1. Open Project management and accounting > Common >

Projects > All projects.
2. Click project 20002.
3. On the Action Pane, select the Manage tab. From the Bill group,
click On-account transactions.
4. Click New.
5. Date it “5/31/2008”, type "Additional Work" in the Description, and
enter “10,000” as the amount. Close the window.
6. On the Action Pane, on the Manage tab, from the Bill group, click
Invoice proposals.
7. Click New, and then click On-account invoice proposals.
8. Enter “5/31/2008” as the Invoice date and “5/31/2008” as the To
date.
9. Click OK.
10. Review the transactions pulled into the proposal. Click Post and then
click OK to post the invoice.

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View Posted Invoices

To view or reprint posted invoices, open Project management and
accounting > Common > Project invoices > Invoice journals.

Invoice journals can be also viewed from the project details form or the project
contract details form. From the Project and Project contract forms, click the
Manage tab. From the Bill group, select Invoice journals.

FIGURE 5.13 INVOICE JOURNAL

This view displays the following:

• Transaction lines on the tabs

• Voucher
• Totals
• Transactions
• Sales and commission entries

To reprint the original invoice, click Print and select either Copy or Original.
Then use standard print management functions to reprint the invoice.

Credit Notes
Use this process to reverse project transactions that should be credited back to the
customer. You can reverse the total invoice amount or select individual
transactions to reverse.

To select individual transactions for a credit note, follow these steps:

1. Open Project management and accounting > Common >

Transactions > Posted project transactions.
2. Select a transaction with a status of Invoiced.
3. On the Action Pane, from the Bill group, click Select for Credit
note.

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Alternatively, you can select from all transactions on an invoice by clicking

Project management and accounting > Common > Project invoices > Invoice
journals. On the Invoice journals form, select the invoice for which you want to
create a credit note. On the menu bar, click Functions, and then click Select for
credit note.

FIGURE 5.14 SELECT FOR CREDIT NOTE

Select the transactions for credit note on each tab and click OK. The transactions
will be reversed and available for selection on an invoice proposal.

When you create a new invoice proposal, ensure that the Invoicing method field
is set to Credit notes or Both to ensure that the selected transactions appear on
the invoice proposal.

Summary
There are two methods for invoicing external projects: time and material and
fixed-price. Time and material projects use the invoice proposal form to gather
all types of transactions billable to the customer and create an invoice based on
the details. Fixed-price projects use on-account invoices based on milestones in
the project. Project contracts determine how invoice proposals are created for
projects.

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Test Your Knowledge

Test your knowledge with the following questions.

1. By default what is the status of an invoice proposal when it is created?

( ) New
( ) Approved
( ) Open
( ) Invoiced

2. Which process allows you to reverse transactions already invoiced to the

customer?
( ) On-account invoicing
( ) Estimates
( ) Fixed-rate agreements
( ) Select for credit note

3. Which fields are required when you set up project contracts? (Select all that
apply)
( ) Project contract ID
( ) Sales currency
( ) Sales tax group
( ) Price group

4. Which of the following project transaction types can be billed to a customer?

(Select all that apply)
( ) Hours
( ) Expenses
( ) Fees
( ) Item consumption

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Quick Interaction: Lessons Learned

Take a moment and write down three key points you have learned from this
chapter

1.

2.

3.

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Solutions
Test Your Knowledge
1. By default what is the status of an invoice proposal when it is created?
( ) New
( ) Approved
(•) Open
( ) Invoiced

2. Which process allows you to reverse transactions already invoiced to the

customer?
( ) On-account invoicing
( ) Estimates
( ) Fixed-rate agreements
(•) Select for credit note

3. Which fields are required when you set up project contracts? (Select all that
apply)
(√) Project contract ID
(√) Sales currency
(√) Sales tax group
( ) Price group

4. Which of the following project transaction types can be billed to a customer?

(Select all that apply)
(√) Hours
(√) Expenses
(√) Fees
(√) Item consumption

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